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A taxing situation

Here are some tips for horse players being audited by you-know-whom.

Once the Internal Revenue Service has requested the pleasure of your receipts, you never look at envelopes in the mailbox the same way again.

I have been audited twice, once briefly over child support after a divorce, the second time, comprehensively.

The second time, the IRS return address on the envelope was facing away as I opened the mailbox, that gesture, probably the courtesy of the mail carrier. Who needs to go looking for good news, or the new and improved TV Guide, then see Internal Revenue Service in black letters. But even the sealed side of an IRS envelope has an ominous dull cast to it. After being audited the first time, the slightest glimpse of a fat brown envelope in the mail box can greatly reduce breathing. After the second audit, I frequently look away when collecting the mail, the colors and contents to be considered later.

The second time, with the brown envelope and the return address-side facing away in the mailbox, I thought: Surely it's an advertisement. Surely it's a bill. Surely it's nothing. What are the odds on that one brown envelope being an audit notice from the IRS, 250,000-1? More? Even if it was an IRS envelope, it could be a form letter about a change in a law. It could a note over a minor detail. It could even be an announcement of a refund.

I took the envelope from the mail box. What was inside made a crinkling sound. Audits crinkle. Must be the cut of the paper and the extra copies for your records; if your envelope from the IRS crinkles, sit down before you fall down.

Here's the first tip: Never open an IRS envelope on a Friday. No need to turn the weekend into two more Mondays. Open it on a week day morning. Ruin a work day.

The first page of the request for the pleasure of your company's company, or the company of your own private self, explains which numbers you are being asked to document. In this instance, the request was, basically, bring everything. The first thing you think is: Of all the juke joints and race tracks major metropolitan areas and wide spots in the outback, why me?

I called my tax attorney, who had 300-and-some clients, and asked him how many other of his customers were being audited at this time. He said not a single one.

We chose as the site for the audit the local Internal Revenue Service office. The appointment was made for something like a month in the future. I recall thinking that was a long time, and wondering what not sleeping for a month might do to a person.

The decor at the IRS office was about what you would expect: cool and simple, cubicles full of office equipment probably bought by the boxcar-full to appease the taxpayer. The memory of this experience that I will keep with me always is of the waiting area on the floor where the IRS agents worked. Four or five of us waited to be audited. The only thing I can compare it to is sitting in a tornado shelter beneath the ground, and wondering what those sounds up there might be.

Horse players are not blessed with tax breaks. Having to fill out a tax form at the windows when you hit a big one, there ought to be a law against that. One of my chief concerns at this audit had to do with the accurate documentation of horse race losses. Professional gamblers must declare themselves as such and play by a strict set of regulations whereby all documented losses can be written off. A gambling business can show losses that exceed winnings. Those to whom wagering is not a profession are permitted to write off losses up to the level of their winnings, and no more.

At some slot and blackjack and dice halls, where there are no cards on which to record bets and results, gamblers must operate on the honor system with the IRS. Horse players must have proper documentation. Proper documentation is something like a line out of the Racing Form: race, bet, date, amount, results. Losing tickets (without heel marks) are acceptable receipts.

Going by the look on my auditor's face as I entered her cubicle and found a seat on the first try, proper horse race documentation does not make noise, which is to say you're not supposed to keep notes and receipts loose in a shoebox or department store box.

And then the angels sang.

"So you like horse races too," my auditor said.

Here's the best tip. As you fill out your taxes, assume somebody is going to ask you about every number.

Write to Jay at jaycronley@yahoo.com